Here's Why We Think Applied Materials (NASDAQ:AMAT) Might Deserve Your Attention Today

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Applied Materials (NASDAQ:AMAT). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Applied Materials

Applied Materials' Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. To the delight of shareholders, Applied Materials has achieved impressive annual EPS growth of 39%, compound, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note Applied Materials achieved similar EBIT margins to last year, revenue grew by a solid 12% to US$26b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Applied Materials.

Are Applied Materials Insiders Aligned With All Shareholders?

Owing to the size of Applied Materials, we wouldn't expect insiders to hold a significant proportion of the company. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. Notably, they have an enviable stake in the company, worth US$332m. We note that this amounts to 0.3% of the company, which may be small owing to the sheer size of Applied Materials but it's still worth mentioning. This still shows shareholders there is a degree of alignment between management and themselves.

Should You Add Applied Materials To Your Watchlist?

Applied Materials' earnings have taken off in quite an impressive fashion. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Applied Materials for a spot on your watchlist. If you think Applied Materials might suit your style as an investor, you could go straight to its annual report, or you could first check our discounted cash flow (DCF) valuation for the company.

Although Applied Materials certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.